CHAPTER 9

NATURE OF
TRADITIONAL AND
E-CONTRACTS

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 A contract is an
agreement that is
enforceable by a court
of law or equity.

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 Introduction

• Basis of many daily activities.

• Means for individuals and businesses to
sell and otherwise transfer property,
services, and other rights.
• Without enforceable contracts, commerce
would collapse.

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 Introduction (continued)

• Contracts are voluntarily entered into by

parties.
• Terms of the contract become private law
between the parties.

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 Legally Enforceable Contract

• If one party fails to perform as promised,

the other party can sue to enforce the
contract and recover damages.

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 Parties to a Contract

• Every contract involves at least two

parties.
– Offeror – the party who makes an offer to
enter into a contract.
– Offeree – the party to whom an offer is made.

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 Parties to a Contract

Offer

Offeror Offeree
Acceptance
Offeror makes an Offeree has the power
offer to the offeree. to accept the offer
and create a contract.

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 To be enforceable, four basic
requirements:

Agreement Consideration

Elements of a Contractual
Lawful Object Contract Capacity

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 Elements of a Contract (continued)

• Agreement
– Offer by offeror and acceptance by offeree.
– Mutual assent.

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 Elements of a Contract (continued)

• Consideration
– The promise must be supported by
bargained-for consideration that is legally
sufficient.
• E.g., money, services

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 Elements of a Contract (continued)

• Contractual Capacity
– Parties must have capacity.
– Certain parties, such as minors or persons
adjudged to be insane, do not have
contractual capacity.

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 Elements of a Contract (continued)

• Lawful Object
– The object of the contract must be lawful.
• E.g., contracts to commit a crime have an illegal
object.
– Contracts to accomplish illegal objects or
contracts that are against public policy are
void.

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 Defenses to Enforcement

• Genuineness of Assent
– Lacking if consent is obtained by:
• Duress
• Undue influence
• Fraud

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 Defenses to Enforcement (continued)

• Writing and Form

– Law requires that certain contracts be in
writing or in a certain form.

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 Evolution of Contract Law

• Freedom of • Form contracts

contract • Government
• Little government regulation
regulation • Parties dealing at
• Parties dealing a distance, unequal
face-to-face, equal bargaining power
bargaining power

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 Sources of Contract Law

• Common Law
– Contract law developed primarily by state
courts.
• Uniform Commercial Code (UCC)
– Comprehensive statutory scheme that
includes laws that cover aspects of
commercial transactions.

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 Sources of Contract Law (continued)

Restatement of the Law of Contracts

– Compilation of model contract law principles
drafted by legal scholars.
– Not legally binding.
– Lawyers and judges often refer to it for
guidance in contract disputes.

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 Objective Theory of Contracts

• Would reasonable person believe that

the parties intended to create a contract?
– Words and conduct
– Surrounding circumstances
• Subjective intent irrelevant.

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 E-Contracts

• Courts apply traditional contract rules

• State and federal statutes also apply
– E.g., Uniform Computer Information
Transactions Act

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 Classification of Contracts

Bilateral Contract Unilateral Contract

• “A promise for a • “A promise for an
promise.” act.”
• E.g., “I promise to pay • E.g., “I promise to pay
you $1,000 if you you $1,000 if you
promise to paint my paint my store.”
store.”
• Most common.

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 Classification of Contracts (continued)

Formal Contracts Informal Contracts

• Require a special • No special form or
form or method of method is required.
creation. • Most contracts
– Contracts Under Seal – Leases
– Recognizances – Sales Contracts
– Negotiable – Service Contracts
Instruments
– Letters of Credit

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 Classification of Contracts (continued)

Valid Contract Void Contract

• Contract that meets • Contract that has no
all of the essential legal effect.
elements to establish • Neither party is
a contract. obligated to perform.
• Enforceable by at • Neither party can
least one of the enforce the contract.
parties.

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 Classification of Contracts (continued)

Voidable Contract Unenforceable

• One or both parties Contract
can avoid contractual • Legal defense to the
obligations. enforcement of the
• If a contract is contract.
avoided, both parties • Parties may
are released from voluntarily perform.
their contractual
obligations.

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 Classification of Contracts (continued)

Executed Contract Executory Contract

• Fully performed on • Not fully performed by
both sides. either or both sides.
• A completed contract.

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 Classification of Contracts (continued)
Express Contract Implied-in-fact
• Expressed in writing Contract
or verbally. • Agreement inferred
by parties’ conduct.
Implied-in-law contract
• No actual contract
• Court imposes agreement
to avoid unjust enrichment.

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 Equity
•Doctrine that permits judges to make
decisions based on fairness, equality,
moral rights, and natural law.
•Sometimes applied in contract cases.

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